More and more parents are asking kids to earn their allowances. Here, three families share their systems — and the lessons they teach.

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All Lori Mackey wanted to do was inspire her two children to get ready for school on time. But no amount of cajoling or prodding worked. One day, out of desperation, she promised to pay them $1 apiece for every morning that they got up when the alarm rang, brushed their hair, ate breakfast, tidied their rooms, and were ready to walk out the door by 8 a.m. Four years later, Briana, now 14, and Devin, 12, have graduated to earning up to $12 a week for doing a set of household chores. And they still get up in time for school every morning. "It's the best money I ever spent," Mackey beams.

Allowances have long been an American family fixture, and for good reason. Experts say that giving kids a set sum of cash to manage regularly helps them learn to handle finances capably as adults. "For most children, an allowance is their first opportunity to experience making choices, budgeting, placing value on things, and figuring out the difference between needs and wants," says Carrie Schwab Pomerantz, chief strategist of consumer education at Charles Schwab & Co. and president of the Charles Schwab Foundation, which supports financial literacy programs.

What some parents, like Mackey, have realized is that kids will do stuff for those dollars, and in today's tough economic times, many moms and dads like the idea of teaching kids that money comes attached to obligations.

So which is better, allowance or wages? There are arguments for each (a no-strings-attached allowance leaves more time for studies; wages teach the lesson that effort leads to reward). "But there's no research that I know of that demonstrates either approach is better," says Robert Duvall, president and chief executive officer of the nonprofit National Council on Economic Education (NCEE). Your best path depends on what your priorities are and what your kids are like — their ages, abilities, and inclinations. To show the range of possibilities, we asked three very different families to share their systems — and got experts to explain what parents can take away from each story.

The approach: Allowance-plus

The mom: Stacy Kaiser, Calabasas, CA

Her goal: As a divorced working mom in her 30s, Kaiser wants to make sure her two daughters understand the financial demands of the real world — including the fact that she can't provide as much money for purely discretionary spending as some of her neighbors. But she doesn't want her girls to feel deprived, so she came up with an "allowance-plus" plan whereby the kids get the money they need and she gets the help around the house that she needs.

Her system: Kaiser pays Jordan, 12, $5 a week in allowance; Katie, 10, receives $3, and both get raises each year. The girls are required to contribute to the weekly household upkeep, but their allowances aren't tied to specific chores. They can spend their dough as they choose. If the girls shirk their duties, they still get their money, but until the work is completed, Kaiser rescinds privileges such as watching TV or playing with friends. If one of them gets tired of a specific job, Kaiser lets her suggest alternatives — so Jordan recently quit cleaning the bathroom counters and started walking the dog instead.

Kaiser won't advance her daughters any money, in hopes that they'll learn to budget. But if they feel the need for additional funds, they can propose bigger projects to tackle for pay ("allowance-plus"). She also wants them to develop negotiating skills, so when Jordan offered to wash the car, Kaiser had her look up the going rate at the car wash, which was $9, and the two negotiated a fee of $5 for the job (Jordan got less than a professional because, as Kaiser told her, she didn't have as much experience and know-how).

Finally, Kaiser gives spontaneous extras if the girls have been behaving well — family movie outings and occasional small cash bonuses. "There's nothing better than when your boss tells you, 'You're doing a great job.' It's real motivation," says Kaiser.

What the expert says: Money coach Mary Hunt, author of Debt-Proof Your Kids, likes that Kaiser's system doesn't cut drastically into the kids' schoolwork or fun time. Also, Hunt adds, by letting her daughters decide when to propose paying jobs, Kaiser is helping them develop real-world entrepreneurial skills without too much pressure.

Enforcing penalties for not doing housework also teaches responsibility, says Hunt. But rather than curtailing privileges, she prefers "issuing citations" that require kids to pay their folks a substantial cash penalty. "It's the world's best deterrent," she claims.

Hunt was pleased to hear that Jordan is about to open a savings account, and she suggests that Kaiser reinforce the girls' long-term money-management abilities by shifting from a weekly allowance to a monthly, a switch she recommends all parents make once their kids turn 10. Sure, it's hard to watch your tween blow her money the day she gets it and then struggle, "but it's the only way she'll learn to plan," Hunt says.

Finally, Hunt approves of Kaiser's system of giving annual raises at the beginning of each school year — which works best, she says, if you simultaneously expand the list of purchases the larger allowance must cover.

The approach: Outsourcing

The mom: Pamela Eyring, Columbia, SC

Her goal: When Eyring, who is in her 40s, tried to get Jacob, 13, and Alexa, 9, to do weekly work in exchange for an allowance, the household quickly fell into disarray. "They were overwhelmed," she says. But Eyring, who had recently begun running a school that teaches international etiquette, still wanted them to pitch in — and to develop a strong work ethic. Searching for a way she and her husband could motivate them, she thought of how she runs her business. "I subcontract jobs," she says. "So I decided to outsource some projects to my kids."

Her system: That was a year and a half ago. The Eyrings now expect the kids to perform a small list of basic chores, such as making their beds, for free. But when the parents need help with big projects (stacking wood in the yard, for example) they let Jacob and Alexa know — and if the kids choose to pitch in, they get paid for it. On average, this nets them about $15 a week, although sometimes Mom and Dad don't have any projects, so the kids don't earn any money — which gives them incentive to save. The Eyrings also encourage them to put half their earnings in a savings account for big purchases. The kids are free to use the rest as pocket money.

What the expert says: Insisting that Jacob and Alexa handle at least some small daily chores for free is a good idea, says Schwab Pomerantz, herself a mother of three. Requiring a baseline of unpaid help gives youngsters the message that all family members need to contribute.

Also, when they think of tasks as job outsourcing, parents are likely to suggest tasks that really benefit the household, says Schwab Pomerantz, and that's a good motivator for kids. Another plus of the Eyrings' system is that the parents control how much time their children spend working. Schwab Pomerantz's suggestion for the future: "As kids get older, they have to meet more demands from school and extracurricular activities, so the Eyrings may want to limit how many chores and outside jobs they let the kids take on and how time-consuming those are. Having busy teens spend several hours stacking wood may not always be the best choice for them."

Finally, the Eyrings are smart to encourage the kids to sock money away. "Making a practice of saving even just 10 percent of your income as early as possible will hugely improve your options later in life," says Schwab Pomerantz. "When you start saving young, it becomes part of your financial DNA."

The approach: Give kids paying jobs — inside and outside the home

The mom: Jan Malone, Vancouver, WA

Her goal: With her sons Jacob, 17, and Keaton, 16, well established in high school, Malone wanted them to take on more responsibility around the house. She also hoped they would learn to plan their spending and to allow for financial responsibilities such as having a car, as well as figure out how to create new opportunities when they needed extra cash.

Her system: Malone, 48, requires the two boys to do weekly chores without pay. But for larger projects, such as wiping down all the baseboards in the house, the teens can earn points worth $1 each, up to 10 points per week. Both boys also work outside jobs. Keaton earns an average of $60 a week, some from teaching computer skills to seniors but most from babysitting. Jacob, who starts college next year, brings in $175 a week from giving guitar lessons. The Malones require Jacob to save half of the money he makes for his freshman-year spending account. "Our goal is that he won't have to take a 'real' job during the school year," his mother says.

When Jacob asked for use of the family car, his parents agreed — as long as he saved the full insurance deductible in case he crashed. Once he'd stashed that money in the bank, the Malones offered to pay his monthly premium in full if he earned a GPA of 3.9 or higher. "I think the lowest he ever got was a 3.8, and he had to pay 10 percent of the premium," his mom says. "He doesn't want that to happen again." To help both boys move toward their goals, Malone — who once worked as a banker — keeps a ledger to record their income and spending, and she goes over it with them regularly.

What the expert says: Robert Duvall of NCEE says that this workplace-oriented approach has several advantages. It provides stability, rewards initiative, and gives kids control over their time as well as their income. Plus, it teaches them there are many ways to earn money.

He also praises the idea of having Jacob save up for his college spending money. That should teach him to set financial goals that extend beyond his daily expenses and give him a greater stake in his education. Having his folks pay his insurance premium if he earns a high GPA sends the message that his parents are committed to having him succeed at his studies, Duvall notes. He also approves of Malone's bookkeeping because tracking and analyzing teen spending starts them thinking like adults about money. Another suggestion: Help kids figure out how to do a cost-benefit analysis of their purchases, he says — for example, ask, "Were those $150 Nikes worth the hours of labor they cost?" The answer is up to them; you're just training them to consider the question.